Martoma Deserves More Than 8 Years in Prison, U.S. Says

Former SAC Capital Advisors LP portfolio manager Mathew Martoma, convicted of orchestrating the most lucrative insider trading scheme in U.S. history, should spend more than eight years in prison, prosecutors told the judge who will sentence him next month.

Martoma, 40, “cultivated and corrupted” two doctors to obtain inside information on clinical tests of a drug to treat Alzheimer’s disease, prosecutors in the office of Manhattan U.S. Attorney Preet Bharara said yesterday in court papers. Martoma made $275 million for SAC and a $9.3 million bonus for himself, they said.

Martoma was convicted in February of using illegal tips from the doctors, who were overseeing tests on the drug, to trade in shares of Elan Corp. and Wyeth LLC. Before trial, Martoma rejected the government’s offer of leniency in exchange for his help in the investigation of SAC Capital founder Steven A. Cohen.

Cohen hasn’t been charged with a crime. The Securities and Exchange Commission filed an administrative action claiming he failed to properly supervise hedge fund employees who carried out insider trades, including Martoma and former hedge fund manager Michael Steinberg.

SAC Capital, which has since changed its name, pleaded guilty last year and agreed to pay $1.8 billion for insider trading and creating what prosecutors called a culture of criminality. Steinberg was sentenced to 3 1/2 years in prison earlier this year.

Martoma argues federal sentencing guidelines, which aren’t binding for the judge, call for a term of five years to 6 1/2 years. He claims he’s responsible only for the bonus he received, not the entire gain by SAC.

Martoma is scheduled to be sentenced by U.S. District Judge Paul Gardephe July 28.

The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan).

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